State Supreme Court sides with retirees on health insurance premiums

The Illinois Supreme Court sided with state retirees Thursday, overruling a judge who threw out the retirees' objection to paying health insurance premiums.

By Dean OlsenStaff Writer

The Illinois Supreme Court sided with state government retirees Thursday, overruling a Sangamon County judge who had thrown out the retirees' challenge of health insurance premiums most began paying last summer for the first time.

The high court ruling by itself didn't eliminate the premiums that most of the 89,000 retirees now pay. But the language of the ruling bodes well for retirees' chances in their ultimate quest to have their share of total premiums struck down, said Springfield lawyer Donald Craven, one of the attorneys representing retirees.

“It's a victory,” he said.

The 6-1 decision also gives an “extraordinarily encouraging sign” that opponents of the state's 2013 pension reform law will ultimately prevail in their pending legal challenge, Chicago lawyer John Fitzgerald told The State Journal-Register.

In the health premiums case, the court overruled Sangamon County Associate Judge Steven Nardulli, who had dismissed four lawsuits that were seeking to stop the state from imposing insurance premiums on retirees with 20 years or more of service who previously paid no premiums. Dissenting from the majority's decision was Justice Anne Burke.

Nardulli ruled in March 2013 that health insurance benefits are not considered “guaranteed pension benefits” protected by state law and that the retirees who sued “do not have a vested contractual interest in free health insurance.”

The state argued that state contributions to retiree health premiums aren't mentioned in the state pension law and aren't paid from the assets of retirement funds, so that money is “fundamentally different” from pension annuities and thus not covered by the pension protection clause of the 1970 Illinois Constitution.

But Supreme Court Justice Charles Freeman, writing for the majority, said eligibility for group health insurance benefits “flows directly from membership in one of the state's various public pension systems.”

As a result, he said the “plain and ordinary meaning” of language in the pension protection clause means health benefits “must be considered to be benefits of membership in a pension or retirement system of the state and, therefore, within that provision's protections.”

Freeman further commented on the strength of the clause when he wrote, “It is clear that if something qualifies as a benefit of the enforceable contractual relationship resulting from membership in one of the state's pension or retirement systems, it cannot be diminished or impaired.”

Health care benefits are not referred to in the pension clause, “but neither is there any limitations imposed concerning them,” the ruling states, adding that any doubts regarding the meaning of the constitution's pension protection provisions should be resolved in favor of state retirees.

Not yet settled

The Supreme Court decision sends the case back to Nardulli for more arguments. The court's decision is available online at bit.ly/ILretireepremiums. Nardulli's ruling is available at bit.ly/ILruling.

Freeman's ruling shows the pension protection clause “has a wide reach,” said Fitzgerald, who represents retired teachers and school administrators in a court challenge of the pension reform law.

“It shows that the Supreme Court is giving the pension protection clause the broad interpretation that the drafters of the Illinois Constitution intended,” he said.

State officials have argued that the state's fiscal crisis justified the law's changes in pension benefits and didn't conflict with the constitution.

The law contains a number of changes designed to eliminate the state's $100 billion pension debt and reduce the amount of state revenue needed to meet pension commitments. The largest component limits the annual raises in retirement benefits and skips them in some years.

Other provisions raise the retirement age for those younger than 45 and cap the amount of salary on which a pension can be earned.

The pension lawsuit is in front of Sangamon County Circuit Judge John Belz.

But however Belz rules, a final resolution of the case is expected to come from the state Supreme Court.

Grant Klinzman, spokesman for Gov. Pat Quinn, said that, despite Thursday's ruling, the governor believes the pension reform law is constitutional and is “urgently needed to ensure that teachers, university employees and state workers who have faithfully contributed to the pension systems have retirement security.”

Illinois Senate President John Cullerton, D-Chicago, expressed questions about the constitutionality of the reform law while voting for it. He put out a statement that said the Supreme Court's ruling “made it very clear” that the pension protection clause “means what it says.”

“If the court's decision is predictive, the challenge of reforming our pension systems will remain,” Cullerton said in the statement.

Union ‘very pleased'

Chicago-based Council 31 of the American Federation of State, County and Municipal Employees said in a prepared statement that the union was “very pleased” with the ruling on retiree premiums and encouraged by its potential impact on the pension changes AFSCME is fighting.

It's not clear when there might be a final decision on whether the health insurance premiums will continue or stop, Craven said. Quinn and the Illinois General Assembly authorized the premiums in a 2012 law aimed at saving the state money. The premiums are being kept in a special fund in case they need to be refunded.

State retirees with more than 20 years of service began paying premiums, effective July 1, 2013, equivalent to 1 percent of their pension benefits if they were eligible for Medicare or 2 percent if they were not eligible for Medicare. Those levels changed on July 1 of this year to 2 percent for Medicare-eligible retirees and 4 percent for retirees not eligible for Medicare.

The average state government employee pension is $24,000 per year, AFSCME spokesman Anders Lindall said. For a retiree at that income level who isn't eligible for Medicare, the current health premium would be $80 per month. It would be $40 for a Medicare-eligible retiree.

Because the average state university retiree pension is $32,000 per year, the monthly premium would be $107 for a retiree at that income level who isn't eligible for Medicare, and $53 per month for a Medicare-eligible retiree.

Springfield resident Jeff Greenberg, 65, said Thursday's ruling was good news. He retired as an AFSCME-represented clerk with the Illinois secretary of state's office in 2009 and deals with many out-of-pocket expenses associated with Crohn's disease.

Though some may consider Greenberg's monthly health premium to the state for Medicare supplemental coverage modest, the $20 expense has made his family's budget even tighter. His 56-year-old wife works as a clerk for a private medical clinic, and he said he is too sick to work.

“When you're making roughly half of the amount you were making when you were working, everything is expensive,” Greenberg said. “We don't have any extras.”

He said state retirees deserve to receive the benefits they were promised. The state's financial condition, he said, is “not our fault.”

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